B.C. business makes a mint on cannabis extraction equipment

An Okanagan company is the first in Canada to earn certification from the American Society of Mechanical Engineers for its manufactured cannabis extraction equipment.

Vitalis Extraction Technology is marketing its product and manufacturing base beyond just Canada, to the U.S., South America and Europe.

Since it started up three years ago Vitalis has grown from 20 to 60 employees with plans to consolidate all of its business locations around the city into a 40,000 sq.ft. facility near the Kelowna International Airport at a cost of $10 million.

Vitalis is on track for a 105 per cent increase in sales this business year.

Pete Patterson, co-owner of Vitalis along with partners Joel Sherlock and James Seabrook, said their sudden growth is a reflection of the “wild west” excitement surrounding the legalization of cannabis globally.

Patterson said while examples of legalization are being studied carefully in Colorado, California, Washington and Oregon, he said other countries are watching how Canada benchmarks the industry foundation on a nation-wide level.

From the outset, Patterson said he and his partners surveyed the industry to find a marketing niche for their CO2 extraction product design, which was created by Seabrook, part of the first UBC Okanagan mechanical engineering graduation class.

He said they settled on focusing on large-scale production given the competition on the smaller end. They chose to provide a product that was reliable and would ultimately would pass ASME certification and that was also geared to hash oil extraction.

The extraction market equipment is based on petroleum-based solvents such as butane and propane along with CO2 natural products. These solvents are exposed to extreme temperatures and pressures, they display structures that fluctuate between intermediate states of solid, liquid and gaseousness.

He said the potential for consumer demand has brought retailers to them with demands to process up to one million pounds of product a year.

Patterson said the fast and unstructured growth of the manufacturing equipment supply side has presented some massive additional costs.

He noted Alberta, B.C. and Ontario all have slightly varying regulatory rules for cannabis extraction equipment, something that Vitalis has taken pains to meet with their equipment, and something other competitors do not.

“I heard one story of two organizations that purchased equipment out of Europe that cost $600,000 and required a further $300,000 to meet certification standards, and an Ontario licensed producer bought a system that required a further $250,000 in upgrade costs,” he said.

“If you don’t bring it up to specs it becomes nothing more than a paperweight. That’s why certification was important to us, as we wanted to stand behind our product.”

But for all the enthusiasm about legalized marijuana business sales revenue, Patterson acknowledges there are similarities to the potential extolled about Internet product investment in the 1990s which led to many companies going bankrupt after securing stock market investment.

“We want to be mindful of what happened when that bubble burst in the mid-90s so we are looking to off-set or revenue stream reliance on the cannabis industry by looking at product development in other areas such as oil and gas industry and mining,” he said.

Patterson said while he and Sherlock came here from larger cities and Seabrook opted to remain here after graduating from UBCO, he said they believe Kelowna has become an ideal location to base a company with global sales aspirations.

“We thought about locating to larger cities like a Toronto, Vancouver or Edmonton, partly because land is cheaper and more available. But we continued to gravitate back to being in Kelowna. And we have found since it allows us to recruit expert talent because of the lifestyle here, and on the manufacturing side of equipment components we have ready access to a supply chain to help meet our metal and electronics needs.”